Acquisition Fails After Ten Years: Intel Launches Full-Stack AI Strategy to Challenge NVIDIA

According to Zhitong Finance APP, one of Intel's (INTC.US) most significant strategic mistakes over the past decade has been its failure to challenge Nvidia's (NVDA.US) dominance in the rapidly growing artificial intelligence (AI) chip market.

In his first earnings call with analysts as Intel's new CEO, Pat Gelsinger outlined how Intel hopes to change this situation, but he also warned, "This is not something that can be accomplished overnight." Gelsinger stated that he would comprehensively review Intel's existing products to better align them with emerging trends in the AI market, such as those applicable to robotics and intelligent agents capable of performing tasks for human users.

This task is highly challenging, as Nvidia is no longer just selling chips but a complete set of data center solutions, covering everything from chips and cables to software compilers. Gelsinger indicated on Thursday that Intel would adopt a similar strategy.

Chief Financial Officer David Zinsner stated that Intel would not engage in excessive acquisitions in the short term. Zinsner mentioned in an interview, "At this stage, our top priority is to improve the condition of our balance sheet."

This means that Gelsinger's efforts to ultimately integrate a coherent AI strategy will primarily rely on in-house research and development.

Gelsinger stated, "We are taking a comprehensive approach to redefine our product portfolio, optimizing our products for emerging AI workloads. Our goal is to become the preferred platform for our customers. This requires us to fundamentally change our design and engineering philosophy and to anticipate customer needs well in advance."

Historically, Intel's strategy has been to let AI startups develop new chips and then acquire those companies. Between 2016 and 2019, the company acquired a series of chip companies, including Movidius, Mobileye (MBLY.US), Nervana, and Habana Labs, hoping these acquisitions would help it penetrate the AI market.

While Mobileye still maintains a strong market position in the autonomous driving sector, and Intel retains shares in the company after its spin-off, the other acquisitions have failed to give Intel an advantage in the competition with Nvidia.

Bob O'Donnell, chief analyst at Technalysis Research, stated, "Intel has a long history of developing important new chips in-house, so I’m not surprised to see them focusing on internal R&D in the AI space. If they can build a suitable software support system to make it easier to deploy these new chips, then they have a chance—but that’s a big 'if.'"

However, other analysts believe that Nvidia's dominance, combined with large cloud computing companies like Amazon (AMZN.US) and Google (GOOGL.US) working hard to develop their own AI chips, leaves Intel with very little opportunity to penetrate this market Hendi Susanto, the portfolio manager of Gabelli Funds, which holds shares in Intel, stated that the company has revealed some details of its overall AI strategy, focusing on developing chips and systems for running AI applications, as well as edge devices.

"While these areas show some development potential, there remains uncertainty regarding the scale and speed of their growth," Susanto added